After a long day, I've finally finished crunching the August Nevada gaming numbers. If you want some historical perspective on this month, keep reading after the jump.

August 2011 was a strange month for Nevada casinos. Overall it was a bad month, with a 6.10% revenue decline, but the picture wasn't totally gloomy. Thanks to slot hold rising statewide, slot win rose ever so slightly. With the handle falling just as slightly, this basically means that the total amount played decreased slightly, but machines kept just enough to post a revenue gain.

This isn't all greedy casino owners tightening machines. As I argued in a paper nearly two years ago, while there's been some drift upward in hold percentages at the denomination level, players migrating to penny slots, which routinely post average hold percentages over 10%, is the chief driver of "slot hold inflation." That doesn't speak directly to August's issues, but it's not a bad thing to have in the back of your mind as you second-guess casino operators.

A quick look at the numbers (page 3 of this pdf) should make August's problems perfectly clear: the $1.1 billion or so drop in baccarat handle. That's a nearly 59% decline. For whatever reason--and you've got to imagine that the early-August stock market jitters and near-shutdown of the federal government didn't help--high-end play didn't materialize this year like it did last. Granted, August 2010 was (I think) a record month, but a 59% decline has got to symbolize something.

Besides that, it was a mostly average month for the rest of the state. Carving baccarat out of the table pie, there was actually a slight gain in table revenues statewide (0.87%) and a respectable one on the Strip (7.49%). So it might be that mid-level demand is slowly reviving just as high-end demand is faltering.

The real surprise in my book is the Boulder Strip Cinderella story. With just about every Las Vegas economic indicator still falling or stuck in neutral and a population that's actually declined, you'd expect the locals Las Vegas market to be mired in a slump. But the exact opposite's happened: the Boulder Strip has posted six straight months of revenue gains. It's possible that Green Valley Ranch and the M Resort, which also draw on visitors, are buoying the rest of the reporting area, but it's also possible that visitors are trading down to other properties on the Boulder Strip. In any event, this has to be a positive for Station Casinos and, to a lesser extent, Boyd Gaming.

In September, will we find that high-limit gamblers have become inured to big-picture uncertainty and are back to their big-playing ways again? Will the locals rebound continue? Only time will tell. But it's clear that the broader economic indicators that show reason for pessimism in Las Vegas, while they may not tell the entire story, aren't totally wrong, either.

Comments

Great stuff from the brighest observer of the business on Earth, IMO.. To think there are people who subscribe to "consulting services" to get info on this industry for Wall Street when all they really need to do is read TWHT for free!

October 11, 2011 5:14 PM
Posted by socalduck

The 59% drop in bacc handle is eye-popping. However, it is hard to imagine a squabble over the US debt ceiling would deter Asian high-limit play. More likely (and more worrisome, IMO), it is a reflection of some serious tremors occurring in the Chinese economy. If I'm not mistaken, there was also some slowing in the still-blistering pace of growth in Macau last month. Could the drop in Vegas bacc handle portend a larger storm just over the horizon? Or was August just an anomaly?

October 11, 2011 6:09 PM
Posted by detroit1051

Strip slot hold 8.07% in August. Compare that to Isle of Capri's Pompano Park racino in Florida at 7.45%, and FL racinos have 35% tax rate. Most tourists may not know Hold percentages, but if they leave Vegas unhappy, they may decide a long, expensive trip isn't worth it.

October 11, 2011 6:48 PM
Posted by Jeff in OKC

Pompano Park got anything else besides horse racing and a snack bar? 2000 room hotel for $150 a night weekends, luxurious swimming pool, great shows or fountains of Bellagio? Las Vegas is still the best entertainment value in America, IMO.

I am also skeptical that broader economic trends and market jitters could cause such a dramatic and sudden drop in high end bacc play. This is an intriguing mystery.

October 12, 2011 2:34 AM
Posted by detroit1051

Jeff, you're right, of course. My point was only that Strip casinos have struggled during the recession, and increasing slot Hold may be a slippery slope. Until FL approves full casino resorts, the Serminoles are the only ones with anything approaching the level of Vegas resorts. Seminole Hard Rock's hotel, pool, concerts, clubs are like Vegas on a small scale. But, they don't release Hold percentages, so we don't have a clue.

October 12, 2011 4:18 AM
Posted by Jeff in OKC

Point taken, Detroit. However, I agree with Dr. Dave's theory in his report that the hold percentage increase in mainly driven by increased play on "penny" machines. It bugs me that the Gaming Control Board allows machines to be labeled penny when the minimum bet allowed on that machine is more than a penny. I recall being at Aria earlier this year and the lowest bet allowed on any of their "penny" machines was 50 cents. Seems to me that should be labeled a 50 cent machine. In protest, I shall refer to these machines in writings with the quotation marks. "penny". That'll change the World, I'm sure. :-)

Good points on the underlying causes of the August bacc drop. Right now, we've just got some questions. The real issue is that, unlike in July,. the rest of the market wasn't strong enough to compensate for a so-so Strip.

October 13, 2011 1:19 PM
Posted by motoman

I dunno... Macao may have "slowed" (i.e., eased up on the full-throttle growth) and there may be disturbing economic signs out of China. But isn't it still true that any growth in Macao would come, from at least some extent, at the expense of that high-end bacc play in Vegas?

Agree w/ Jeff, let's put "penny" in quotes.

October 14, 2011 8:56 AM
Posted by socalduck

I agree, motoman. It seems logical that at least some portion of the Vegas decline is the result of Asian players opting to stay in Macau, in which case Wynn, Sheldon, et al will simply book that missing bacc play in Macau or Singapore instead of Vegas. Similarly, it could be that any perceived slowing is just a temporary blip rather than the start of some big decline; there is a vigorous debate occurring on this very issue. The problem with China is that the economic data (both macro data as well as corporate earnings) is heavily manipulated by the Chinese government, so it is not easy to divine what is really happening. However, as a former resident of Texas and California, I have seen my share of real estate bubbles, and China is in the midst of a whopper of a bubble. Will it end soon? Who knows? But one thing we have all learned, bursting bubbles never end well.